Abstract
Notwithstanding the considerable literature on the A-J-W effect (so named after Averch, Johnson and Wellisz), there still seems to be confusion about the desirability of the output expansion that may sometimes be produced by this effect. In a 1968 comment [4, 170-173], Alfred Kahn argues that the A-J-W expansionary effect on output might be a desirable offset to the monopolistic restriction of output. William Baumol and Alvin Klevorick [2, 168] lend credence to Kahn's assertion by agreeing that the incentive to overinvest in capital (if it produces output expansion) could be a desirable offset to the monopolist's tendency to underinvest and restrict production. The argument is repeated more forcefully in Kahn's well-known text on regulation [5, 59], where he contends that ... the A-J-W tendency, to the limited extent it exists, could well be a more important influence for good than for poor performance. Moreover, in reference to Kahn's 1968 comment, Klevorick [6, 729] credits him with making explicit the trade-off between the social welfare loss
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
